Ripple (XRP)–The price of cryptocurrency is finally moving in the positive direction after nearly a month of price depression. Among the top 5 currencies, Ripple (XRP) had one of the greatest dips in valuation, falling from an all-time high of 3.80 USD at the start of the new year to nearly 0.63 USD at the most recent low, constituting a decrease of 83%. However, that’s crypto. The blistering price increases that create millionaires overnight also can evaporate in a very short period of time.
Here is what could not only make the valuation of Ripple takeoff, but help buffer the currency against future price swings:
Adoption as a Currency By a Major Commerce Site
We have mentioned the connection between Amazon and Ripple times in the past, but it’s worth repeating. Not only does XRP offer one of the most functional cryptocurrencies for transactions (with .00001 XRP consumed in fees and a transaction speed of under 5 seconds), but it has the right supporting cast to make such a partnership possible. Bitcoin has the brand name and media attention. Being the first cryptocurrency, in conjunction with a compelling history of the mysterious founder Satoshi Nakamoto, has created a fascination for the general public. Bitcoin, unlike Ripple, is synonymous with currency. The function of BTC, at its fundamental level, is a unit of exchange that can be separated from government fiat. The greatest appeal of Bitcoin, outside of the appreciating price, is the ability to conduct transactions with a new method of money that combines the revolutionary technology of blockchain with a digital means of exchange. Because of that, Bitcoin is pegged as a favorite in the race for first-adoption by an internet commerce giant like Amazon, EBay or Walmart.
But we envision XRP as the dark horse candidate.
For one, a company like Amazon prides itself on total convenience for the customer. The recent healthcare conglomerate announcement and a reading of Brad Stone’s Everything Store reveals CEO Jeff Bezos as a man of many motivations. But, at his core, he is a risk taker, a man bent on growing Amazon into the world’s most pervasive company and one that seeks to always improve the experience of the customer. At some point in the very near future, those guiding principles are going to necessitate Amazon to take a dive into cryptocurrency. Bitcoin may be the obvious choice, but there is compelling evidence for Ripple and the XRP coin to become Amazon’s currency of choice. It’s possible the commerce giant will make a sweeping movement and allow a variety of currencies, or at least give their contracted sellers the option of choosing the currency they transact with. But Amazon is also cognizant of the benefit of keeping things simple to improve their user interface.
Ripple: Perfect Currency for Digital Transactions
Ripple could bridge the gap between Amazon (or a similar online commerce giant) and cryptocurrency. For the above mentioned reasons, XRP has a large amount of utility as a currency, which is necessary for online transactions. Buyers and sellers are going to refute spending a currency with higher costs than what they are accustomed to with traditional fiat (outside of those looking to spend their accumulated BTC without paying capital gains). There is also a barrier of use with deflationary currencies. In Charles Wheelan’s Naked Money, he points out that Bitcoin, like other attempts at deflationary currencies, suffers from a reluctance to spend on behalf of the owner. It’s hard to justify spending BTC today at 10000 USD, when it may be worth 15000 USD a month from now.
Ripple suffers from the same problem of deflation (as, like most cryptocurrencies, there is a hard cap supply set at 100 billion XRP). But Ripple has something that Bitcoin doesn’t: over half the entire reserve of the coin is tied up in escrow. Of course Bitcoin has miners that are slowly releasing more coins over time, but not to the same extent as 55 billion XRP locked into escrow for the next half-decade. Originally, we had posited that this vaulted coinage would be used to entice large banks and financial institutions as a reserve for liquidity in transactions (imagine JP Morgan going to Bittrex to buy 1 billion XRP and you get the point). But that very same reserve function could be used to stabilize XRP in the event that it does become a ubiquitous currency.
We have seen Ripple follow a rather consistent pattern in pricing over the last year. While the timing varies, XRP tends to follow a stagnation-then-bust model, where positive news, partnership announcements and methods of adoption are baked into the price over a very long period of time before finally giving way to an exponential price increase. The same would happen with Amazon. If XRP were to be adopted by Amazon or EBay, we would see a massive surge in XRP pricing that would then level off due to the sheer amount of liquidity in the coin. One hundred billion coins creates a lot of currency volume to exchange hands. Couple that with Ripple (the company) able to introduce more XRP into the market through escrow, and we have what could be a relatively stable currency for large scale transactions.
So while the end goal and end result of a commerce giant’s adoption of XRP is counter-intuitively price stability, it will lead to short-term exponential increases in price (imagine how much XRP you would buy if you knew Amazon would start using it in six months) and long-term buffering against sudden and severe price drops. There will always be speculators in crypto looking for risky currencies that offer large returns, but the greatest adoption is going to come from the currency that can instill the most confidence in the general public. XRP has the technology to perform as a usable currency in transactions, it’s built to scale on the level of trillion dollar bank and money transfer firms, and it has the high liquidity useful for price stability and widespread adoption (you can own whole XRP coins instead of fractions of other currencies). Even if Amazon overlooks Ripple, it is only a matter of time before other sites of internet commerce adopt the cryptocurrency that is already making waves in the financial industry.